{"id":84282,"date":"1999-05-14T00:00:00","date_gmt":"1999-05-13T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/food-corporation-of-india-vs-sreekanth-transport-on-14-may-1999-2"},"modified":"2017-03-12T05:14:42","modified_gmt":"2017-03-11T23:44:42","slug":"food-corporation-of-india-vs-sreekanth-transport-on-14-may-1999-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/food-corporation-of-india-vs-sreekanth-transport-on-14-may-1999-2","title":{"rendered":"Food Corporation Of India vs Sreekanth Transport on 14 May, 1999"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Food Corporation Of India vs Sreekanth Transport on 14 May, 1999<\/div>\n
Author: Banerjee<\/div>\n
Bench: Umesh C. Banerjee, V.N.Khare<\/div>\n
           PETITIONER:\nFOOD CORPORATION OF INDIA\n\n\tVs.\n\nRESPONDENT:\nSREEKANTH TRANSPORT\n\nDATE OF JUDGMENT:\t14\/05\/1999\n\nBENCH:\nUmesh C. Banerjee, V.N.Khare\n\n\n\n\nJUDGMENT:\n<\/pre>\n
BANERJEE, J.\n<\/p>\n
      These  appeals by the grant of Special Leave  pertains
\nto  the effect of the usual `excepted clause’ vis-a- vis the
\narbitration  clause  in a Government contract.\tWhile it  is
\ntrue  and  as has been contended, that the authorisation  of
\nthe  arbitrators to arbitrate, flows from the agreement\t but
\nthe  High  Court in the judgment impugned thought it fit  to
\ndirect\tadjudication of `excepted matters’ in the  agreement
\nitself\tby  the arbitrators and hence these  appeals  before
\nthis  Court.  At the outset, it is pertinent to note that in
\nthe  usual  Governmental contracts, the reference  to  which
\nwould  be made immediately hereafter, there is exclusion  of
\nsome  matters  from the purview of arbitration and a  senior
\nofficer of the Department usually is given the authority and
\npower  to  adjudicate the same.\t The clause  itself  records
\nthat  the  decision  of\t the   senior  officer,\t being\t the
\nadjudicator,  shall be final and binding between the parties\n<\/p>\n
–  this\t is what popularly known as `excepted matters’ in  a
\nGovernment  or\tGovernmental agencies’ contract.   `Excepted
\nmatters’  obviously,  as the parties agreed, do not  require
\nany further adjudication since the agreement itself provides
\na  named adjudicator – concurrence to the same obviously  is
\npresumed  by  reason  of the unequivocal acceptance  of\t the
\nterms  of the contract by the parties and this is where\t the
\ncourts\thave  found  out  lacking  in  its  jurisdiction  to
\nentertain  an  application for reference to  arbitration  as
\nregards\t the disputes arising therefrom and it has been\t the
\nconsistent  view that in the event the claims arising within
\nthe  ambit  of excepted matters, question of  assumption  of
\njurisdiction  of  any arbitrator either with or without\t the
\nintervention  of  the  court would not arise;\tThe  parties
\nthemselves  have  decided to have the same adjudicated by  a
\nparticular  officer  in regard to these matters:   what\t are
\nthese  exceptions however are questions of fact and  usually
\nmentioned  in  the contract documents and forms part of\t the
\nagreement  as  such there is no ambiguity in the  matter  of
\nadjudication  of these specialised matters and termed in the
\nagreement as the excepted matters.\n<\/p>\n
      As  noticed  above,  the High Court, however,  has  in
\nfact,  referred matters which are in terms of the  agreement
\nwithin the excepted matters to the arbitrator along with the
\nother  arbitrable disputes.  It would be convenient to\tnote
\nthe Arbitration clause at this juncture.\n<\/p>\n
      “All  disputes  and differences arising out of in\t any
\nway touching or concerning this agreement whatsoever (except
\nas to any matter the decision of which is expressly provided
\nfor  in\t the  contract)\t shall\tbe  referred  to  the\tsole
\narbitration  of a person appointed by the Managing  Director
\nof the FCI.  It will be no objection to any such appointment
\nthat  the  person  appointed is or was an  employee  of\t the
\nCorporation  that  he had to deal with the matters to  which
\nthe contract relates and that in the course of his duties as
\nsuch  employee of the corporation he had expressed views  on
\nall  or\t any of the matters in dispute of  difference.\t The
\nBoard  of such Arbitration shall be final and binding on the
\nparties\t of  this contract.  It is a term of  this  contract
\nthat  in the event of such arbitration to whom the matter is
\noriginally referred being transferred or vacating his office
\nor  being  unable  to act for reasons  the  Manager\/Managing
\nDirector  of the FCI at the time of such transfer,  vacation
\nof  office or inability to act shall appoint another  person
\nas  arbitrator.\t  Such persons shall be entitled to  proceed
\nwith  reference\t from the stage at which it was left by\t his
\npredecessor.   It  is also a term of this contract  that  no
\nperson\tother  than  a\tperson\tappointed  by  the  Managing
\nDirector as aforesaid shall act as Arbitrator and if for any
\nreasons\t that  it  is  not possible the\t matter\t is  not  be
\nreferred to Arbitration at all.\n<\/p>\n
      It  is  term  of a contract that\tthe  party  invoking
\narbitration  under  this clause shall specify  the  disputes
\nand\/or\tdifference  to be referred to  arbitration  together
\nwith   the   amount  claimed  in   respect  of\t each\tsuch
\ndispute\/difference,  at the time of making a request to\t the
\nManaging Director for appointment of an arbitrator.\n<\/p>\n
      Provided\tfurther\t that any demand for arbitration  in
\nrespect\t of any claims of the contractors under the contract
\nshall be in writing and are made within one year of the date
\nof  termination\t of completion (or expiry of the period)  of
\nthe contractor from the date of termination of the contract,
\nif  it\tis terminated earlier and where such demand  is\t not
\nmade  within  that  period, the claims, of  the\t contractors
\nshall  be  discharged and released of all liabilities  under
\nthe  contract  in  respect of these claims.  It\t is  further
\nprovided  that\tthe Arbitrator may, from time to time,\twith
\nthe  consent of the parties enlarge the time for making\t and
\npublishing the award.\n<\/p>\n
      In all cases where the claim in dispute is Rs,25,000\/-
\nand  above  the arbitrator shall record the reasons for\t his
\naward.\n<\/p>\n
      Subject  as  aforesaid the Arbitration Act 1940  shall
\napply to the Arbitration proceedings under this clause.\t The
\ncosts  of and in connection with Arbitration shall be in the
\ndiscretion  of\tthe  arbitrator\t who  may  make\t a  suitable
\nprovision for the same in his award”.\n<\/p>\n
      Turning  now  on to the contextual facts,\t it  appears
\nthat  by reason of certain disputes between the parties\t the
\nRespondent  herein instituted a suit under Section 20 of the
\nArbitration  Act for the purposes of filing the\t Arbitration
\nAgreement in Court being CSNo.304 of 1982.  Incidentally, be
\nit noted that in the plaint filed in the suit the Respondent
\nherein\thas included four several claims of which the fourth
\nclaim  pertains\t to the excepted matters in terms of  clause
\nXII  of\t the agreement.\t The claims as lodged in the  plaint
\nare as below:\n<\/p>\n
      (a)  “Whether  the  Plaintiff’s\tare  liable  to\t pay
\ndemurrage  or  whether the defendants are liable to pay\t the
\ndemurrage  accrued  due to the omissions and commissions  of
\nthe  officials\tof  the\t defendants   and  to  the  abnormal
\nconditions prevailing at the Railway goods sheds?\n<\/p>\n
      (b)  Whether the plaintiffs are liable to pay costs of
\nthe water obtained from outside by the defendants?\n<\/p>\n
      (c)  Whether  the defendants are entitled\t to  recover
\namounts\t allegedly  due\t in  respect of\t the  contract\twith
\nExpress\t Clearing  Agency  or any other\t contract  from\t the
\nplaintiff  from\t out  of  the amounts due  in  this  present
\ncontract?\n<\/p>\n
      (d)  Whether  the defendants are not liable to pay  to
\nthe  plaintiffs\t a  sum\t of Rs.70,000\/- in  respect  of\t the
\ntransport  of  Rice  from Madras to Ronigunta from  June  to
\nAugust 1979?”\n<\/p>\n
      It  is  this  inclusion  of  Claim  (d)  which  stands
\nobjected by the Appellant herein and the learned Trial Judge
\nby  reason of the same being covered under clause 12 of\t the
\nagreement  declined  to include the same.  Since  the  issue
\npertains  to such an exclusion it is convenient also to note
\nClause 12 of the agreement, Clause 12 reads as below:\n<\/p>\n
      “The   decisions\tof  the\t  Senior  Regional   Manager
\nregarding   such  failure  of\tthe  contractors  and  their
\nliability  for the losses etc.\tsuffered by the\t Corporation
\nshall be final and binding on the contractors.”\n<\/p>\n
      The  Factual  backdrop further depict that  after\t the
\norder  of the Learned Trial Judge the matters were taken  up
\nto  the\t appellate court wherein on an application for\tstay
\nthe  respondent\t herein\t has  obtained\tan  order  of  stay.
\nIncidentally,  during  the  pendency of Section\t 20  matter,
\nthere  was also an application under Section 34 for stay  of
\nthe  suit  –  the application under Section 34\thowever\t was
\ndismissed  though the suit under Section 20 was not  ordered
\nin  its\t entirety as has been pleaded and prayed before\t the
\nCourt.\tBe that as it may when the matter came up before the
\nappellate court, the appellate court passed an interlocutory
\norder  of injunction directing stay of the operation of\t the
\norder.\t It  is\t only  thereafter however,  as\tthe  factual
\nbackdrop  argued before this Court that the Food Corporation
\nof  India thought it fit to institute a suit for recovery of
\nloss  damage  and  expenses  suffered and  incurred  by\t the
\nAppellant  herein  in  paying the  demurrage,  wharfage\t and
\nexpenses  for  forfeiture  of  wagon   on  account  of\t the
\nnegligence,  lapse  and\t unworkmanlike\tperformance  of\t the
\nRespondent herein in performing their duties and obligations
\nunder  the  contract.\tIn paragraph 11 of the\tplaint,\t the
\nPlaintiff prayed before the Court the following:\n<\/p>\n
      “(a) directing the defendants jointly and severally to
\npay the plaintiff the sum of Rs.1,89,775.00 (Rupees One lakh
\neighty\tnine  thousand seven hundred and seventy five  only)
\ntogether  with interest at 18 per cent per annum on the said
\nsum from the date of plaint till date of realisation;\n<\/p>\n
      (b)  directing the defendants to pay the costs of\t the
\nsuit;\tand  (c) pass such further or other relief  as\tthis
\nHon’ble Court may deem fit and proper and render justice.\n<\/p>\n
      Significantly enough in paragraph 8 of the Plaint, the
\nappellant  Food\t Corporation  of India being  the  Plaintiff
\ntherein stated as below:\n<\/p>\n
      “8.   The Senior Regional Manager, Food Corporation of
\nIndia,\tTamil Nadu Region, as the Head of the Offices of the
\nCorporation  in the State of Tamil Nadu and as party to\t the
\ntender\tcontract  is entitled to and competent to  file\t the
\nsuit  for the recovery of the sum due to the Corporation, as
\nset  out  in  this  Plaint.  The  District  Manager,  Madras
\nDistrcit  of  the  Food\t Corporation  of  India\t is  also  a
\nPrincipal  Officer of the Corporation and has been not\tonly
\nclosely\t associated  with the contract and the work  covered
\nthereon\t but  also is the authority who has  been  effecting
\npayments,  supervising and controlling the actual  execution
\nof  the\t work  by the defendant\t contractor.   The  District
\nManager\t and his men have been duly authorised for the\tsaid
\npurpose and has been authorised to institute the proceedings
\nand  sign and execute the pleadings and the Vakalath for and
\non  behalf of the Senior Regional Manager, Food\t Corporation
\nof  India.   This  is the position under the  provisions  of
\nClause III of the Contract also.\n<\/p>\n
      But  what about the rights preserved under clause\t 12,
\nwe  searched  in  vain,\t in  that  regard:   The  plaint  is
\ndelightfully  silent on that score excepting the averment as
\ncontained  in  paragraph  8  as\t noticed  above.   The\tFood
\nCorporation  therefore,\t as  a\tmatter of  fact\t desired  an
\nadjudication  of their claim to the extent of  Rs.1,89,775\/-
\ntogether  with interest at the rate of 18 per cent per annum
\nfrom  the  Civil  Court\t rather\t  than\trelying\t on  to\t the
\nadjudicatory  process  available  in   the  contract  itself
\nthrough their own Senior Regional Manager.  The agreement as
\nnoticed\t above expressly provide that the adjudication shall
\nbe  effected by the Senior Regional Manager and by no  other
\nauthority  and\tthe  decision, it has been recorded  in\t the
\nagreement,  of\tthe Senior Regional Manager, would be  final
\nand  binding on the parties.  There is therefore, a positive
\nact  on the part of the Food Corporation of India not to put
\nany  reliance on to that particular clause of the agreement.
\nThere  is, as a matter of fact, thus on the state of  facts,
\nas  above,  appears  to\t be  a\tpositive  relinquishment  or
\nabandonment  of\t a right so far as the adjudication  of\t the
\nexcepted  matters are concerned by the Appellant Corporation
\nsince  the Corporation itself wanted to have it\t adjudicated
\nby  a Civil Court.  Learned Advocate appearing in support of
\nthese  appeals\tvery strongly contended that as a matter  of
\nfact,  the  Corporation has had no other alternative but  to
\ninitiate  a civil suit by reason of the order of  injunction
\nand  in any event it has been contended that initiation of a
\ncivil  suit  in\t the  Civil Court does\tnot  and  cannot  be
\nidentified  to be acceptance of the Arbitration Agreement in
\nthe  matter  –\twhether\t it does or it does  not  amount  to
\nacceptation of Arbitration or not, we are not expressing any
\nopinion\t in  that regard but the fact remains that in  fact,
\nthere  was an abandonment of a right of adjudication by\t one
\nof the Corporation’s officer so far as the wharfage claim is
\nconcerned  and it is on this perspective that the  Appellate
\nBench  of the High Court was pleased to direct that all\t the
\nissues\tin  dispute  in suit No.C.S.  304 of 1982  shall  be
\nreferred  to  L.R.Kohli,  Arbitrator.  The High Court  as  a
\nmatter\tof  fact  came to a conclusion that the\t dispute  in
\nCivil  Suit No.368 of 1986 has intrinsic connection with the
\nfourth\tclaim  of  the Respondent herein in Suit  No.304  of
\n1982.  The Appellate Bench observed:\n<\/p>\n
      “Since three of the four times of the disputes between
\nthe  parties  in  C.S.No.304 of 1982 have been\treferred  to
\narbitration,  it  is indeed improper to exclude one item  in
\nrespect\t of damage connected with the other matter which  is
\nbefore\tthe Arbitrator for Court’s adjudication.  There\t can
\nbe  in a situation like this conflict in the  pronouncements
\nall connected facts and the Arbitrator may take one view and
\nthe court another depending upon evidence brought before the
\ncourt and the Arbitrator respectively by the parties.  There
\ncan  be no finality to the adjudication in this behalf until
\nall  proceedings in the Court independent of the proceedings
\nunder  the  Arbitration\t act  are   concluded.\t In  such  a
\nsituation just and proper order, in our opinion, is that the
\ndispute in C.S.No.368 of 1986 which is nothing but a subject
\nconnected  with\t CS No.304 of 1986 shall be included in\t the
\nreference  to the Arbitrator and is accordingly referred  to
\nthe  same  Arbitrator before whom the reference\t is  pending
\nadjudication.”\n<\/p>\n
      The  facts  of the matter in issue is thus  singularly
\nsingular  since the Corporation being a party dominant feels
\nit  expedient  to  institute  a civil  suit  without  taking
\nrecourse to the provisions of the agreement for adjudication
\nof  its\t claims.  The other party namely the contractor\t has
\nalready filed a suit in terms of Section 20 and the suit has
\nbeen  disposed\tof by an order of reference by the Court  in
\nterms  of  provisions  of  Section 20 in  so  far  as  three
\nprincipal   disputes  are  concerned.\t The   other   claim
\nconcerning  wharfage  stands  negated by the  learned  Trial
\nJudge and in our view very rightly by reason of clause 12 of
\nthe  agreement – here comes thereafter a situation which  is
\nrather\tsignificant and as noted above singularly  singular:
\nthe  Food  Corporation itself gives a go by to its right  of
\nadjudication  through the Senior Regional Manager as regards
\nthe  wharfage  claim and initiates proceeding in  the  Civil
\nCourt.\t It is this initiation which has been objected to by
\nthe  contractor\t on  the plea that since the  civil  courts’
\nadjudicatory  process  has  been taken recourse\t to  by\t the
\ndominant  litus, the court ought to direct to sub-serve\t the
\nends  of justice in a manner so that the issue covering\t the
\nCorporation’s  suit  be also referred to  arbitration  since
\nthat has direct nexus with the other three issues as already
\nbeen  directed\tto be referred to arbitration.\tThe  learned
\nadvocate  for the contractor strongly contended that in\t the
\nevent  the same is not ordered, as has been directed by\t the
\nHigh Court then and in that event two sets of evidence would
\nbe  required  covering the identical field and as  such\t the
\nAppellate  Bench  thought  it fit to refer the\tdisputes  in
\nCorporation’s  suit  as well to arbitration so\tto  minimise
\nexpenses  and  to  observe  and follow\tthe  requirement  of
\njustice\t in the matter of expeditious disposal of the entire
\nmatter in dispute between the parties<\/p>\n
      In  the normal circumstances, course of events as they
\nare,  this court would not have dealt with the matters as is
\nbeing  presently  dealt with but as has been pointed out  by
\nthe  High Court itself that the matters have been dealt with
\nupon  consideration of the cause of justice and to sub-serve
\nthe  need of justice, we also do deem it fit and proper that
\nby  reason of the factual situation in the matter, the\tHigh
\nCourt  was  not\t left with any option but to direct  such  a
\ncourse\t of  action  more  so  by  reason  of\tan   express
\n`abandonment  of  right’  as noticed above.  In\t the  normal
\ncourse\tof  events  if\tthis particular clause\t12  was\t not
\navailable  in the contract between the parties the  disputes
\nin  its\t entirety by reason of the scope and purview of\t the
\nArbitration  Clause, could have been referred to arbitration
\nand there would not have been any necessity for delving into
\na  matter in the manner as we have, herein before, but it is
\nby  reason  of the factum of incorporation of clause 12\t and
\nthe  subsequent abandonment thereof by reason of a  decision
\nto  have the claim covered under clause 12 to be adjudicated
\nby  a  forum  different\t from that of  the  Senior  Regional
\nManager,  we  also  have no option left but  to\t record\t our
\nconcurrence  with  the\tfinding of the High Court  that\t the
\nfourth\tdispute\t being\tthe subject matter of a\t civil\tsuit
\ninitiated  by the Food Corporation of India be also referred
\nto  arbitration.   Be it noted that this order is passed  in
\nthe  peculiar facts and circumstances of the facts in  issue
\nand  the issue as regards the excepted matters have not been
\ndelved into in detail excepting however as above.\n<\/p>\n
      In  that\tview  of the matter, we do deem\t it  fit  to
\nrecord\tour concurrence with the findings of the High  Court
\nmore  so  in the peculiar facts and circumstances  centering
\nround  these  Appeals.\tThe appeals therefore, fail and\t are
\ndismissed.  No order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Food Corporation Of India vs Sreekanth Transport on 14 May, 1999 Author: Banerjee Bench: Umesh C. Banerjee, V.N.Khare PETITIONER: FOOD CORPORATION OF INDIA Vs. RESPONDENT: SREEKANTH TRANSPORT DATE OF JUDGMENT: 14\/05\/1999 BENCH: Umesh C. Banerjee, V.N.Khare JUDGMENT: BANERJEE, J. These appeals by the grant of Special Leave pertains to the effect […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-84282","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nFood Corporation Of India vs Sreekanth Transport on 14 May, 1999 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/food-corporation-of-india-vs-sreekanth-transport-on-14-may-1999-2\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Food Corporation Of India vs Sreekanth Transport on 14 May, 1999 - 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